Business Confidence Hits Three-Year High

More than a third of companies forecast growth, indicating a high degree of confidence in the U.S. private sector, according to IHS Markit’s latest Business Outlook report. Favorable business conditions and new product developments are reasons for the positive sentiment. Expectations regarding future output were also buoyed by strong client demand and larger customer bases. Potential threats to growth include supply chain pressures and changes in government regulations.

“The latest data on industrial production has been as impressive as it has been in several years, and the most interesting aspect of this recovery is that it has come despite the impact of the hurricanes,” said NACM Economist Chris Kuehl, Ph.D. “The drivers for the manufacturing boost have been manifesting all year and continue to pick up speed. The export sector is as strong as it has been since the recession because the economies of Europe and Japan have been on the rebound and they are both important markets for the U.S. The weaker dollar has been a big contributor as well.”

“Optimism among private sector firms is the highest since June 2014 for both output and new orders,” said Sian Jones, economist at IHS Markit. “Moreover, confidence is reflected across both manufacturers and service providers. In line with greater confidence, business revenues are forecast to rise at the quickest pace since mid-2014. Similarly, expectations around profits are the strongest since February 2014. Expenditure on capital investment, however, is predicted to soften from the previous survey period, but remained in line with recent trends.”

Optimism is also high in regards to increasing staffing levels among goods producers for the coming year. Confidence in hiring is at its highest in three years. Service providers also foresee a pickup in job hiring plans. Workforce numbers in the U.S. are expected to grow at a faster pace than the global average.

Supplier shortages and higher raw materials prices will weigh on the cost burdens of private sector firms over the coming year, though companies expect just a mild rise in input prices compared to the global average, IHS Markit said.

– Adam Fusco, associate editor

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